Foreigners Concentrate on Buying LG Chem Shares Worth 450 Billion KRW This Month
Buying Momentum Rekindled After CS's 'Sell' Recommendation at End of May
Strong Corporate Fundamentals Seen as a Buying Opportunity at Lower Prices
[Asia Economy Reporter Minwoo Lee] Foreign investors are once again pouring funds into LG Chem, which had been sluggish for some time. This is interpreted as bargain hunting following a recent sharp decline, despite the company's fundamentals remaining intact.
According to the Korea Exchange on the 25th, foreign investors have purchased a total of 458.6 billion KRW worth of LG Chem shares so far this month until the previous day. LG Chem ranked first among stocks with the largest net foreign buying this month. Except for six trading days this month, foreign investors consistently net bought the stock. Notably, there was a continuous net buying streak from the 3rd to the 11th, marking the longest consecutive net buying since early January.
After the end of last month, the foreign investment bank Credit Suisse (CS) issued a 'sell' rating on LG Chem and significantly lowered its target price by about 47%, which led to a sharp drop in the stock price. CS argued that LG Chem should be subject to a 'holding company discount' due to the initial public offering (IPO) of its secondary battery division, LG Energy Solution. Consequently, on the 26th, LG Chem's stock price fell 6.73% in a single day, wiping out about 4 trillion KRW in market capitalization. Foreign investors net sold about 340 billion KRW worth of shares over two days on the 26th and 27th of last month.
The reversal in this trend is interpreted as foreign investors judging that LG Chem's business capabilities remain solid, thus the downward pressure on the stock price is weak, prompting bargain buying. The business value of the information materials sector, centered on cathode materials, is being re-evaluated, and considering that LG Chem holds a top-tier secondary battery company as a major subsidiary, along with strong cash mobilization and technological capabilities, the growth potential of the battery materials sector is expected to be significant. The stock price has already begun to respond. After plunging to the 700,000 KRW range at the end of last month, it has been gradually trending upward. As of 9:33 AM today, it recovered to 845,000 KRW, up 1.56% from the previous day.
Park Yeonju, a researcher at Mirae Asset Securities, explained, "In the short term, the supply and demand impact may continue as the LG Energy Solution listing approaches, but from a medium-term perspective, LG Chem's growth potential remains high." She added, "The production capacity of cathode materials is also increasing, and there is a high possibility of expanding other battery materials businesses."
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